Those of you who have experienced international relocation will be familiar with the joys of fluctuating currency exchange rates, fund transfer fees, and a net worth that is virtually impossible to track on a regular basis. There are three main options for getting access to your money and retaining some sense of control over your finances, and while some are specific to international relocation, all have relevance, wherever in the world you find yourself.
The Cheat Sheet – Four Main Options:
1. Keep your home bank and withdraw cash via:
- ATM (quick, usually easy, expensive, insecure)
- Forex Bureaux (slower, but cheaper and safer)
- Visa / Mastercard Bank Draft (painfully slow and expensive)
This is easier in the short term, but it does not establish a credit history for you, not all banks and businesses will honor your card, and you will be constantly required to verify your identity. It is also very expensive; you will pay bank fees at both ends of every transaction, and you are vulnerable to exchange rate fluctuations.
2. Open a host country bank/credit union account and be paid locally, provided you meet their requirements, usually:
- Proof of identity and legal status (e.g. passport and resident visa)
- Proof of residence
- Social Security/Tax Identification Number
- Local Income
Excellent for long term residence as it establishes credit history, you are able to budget accurately, and is a cheaper form of banking. If you still have financial commitments in your home country, you will pay fees to transfer money back, and again, are vulnerable to exchange rate fluctuations.
3. Combined home and host banking, using wire transfers to move money between accounts.
Cheaper in the long term, providing that you transfer larger amounts less frequently. Transferring money often requires contacting your home bank directly, which is inconvenient if there is a time difference. Keeping track of your finances across two bank accounts can be confusing, and again, you are vulnerable to exchange rate fluctuations.
4. Global bank accounts
Becoming more popular as international assignment numbers increase. Highly convenient, but accounts typically require considerable financial investment or income.
Primary Account – Home Country
Cashing Checks from your Home Bank Account
Foreign Exchange Bureaux. For 3 years, this was my main way of accessing my money, and I have to say, one of the most manageable. It’s advantages were multiple; I knew exactly how much I was taking out of my account, I could use my checkbook for my UK bank account, so didn’t incur fees; I got a decent and immediate rate of exchange which I could negotiate, it was secure, and it supported our local foreign exchange business. My weekly trips meant that I built up a very good relationship with the business owners, and I got extremely preferential rates whatever amount I needed, simply because they wanted to keep my business. It worked like this: I would go to the Forex bureau in my local town centre and write a check for the amount I wanted to withdraw in UK currency – for example, £ 100. (Obviously, if I had had a different home location, it would have been in whatever was the currency of my home bank location). They would then give me the UK pound – Kenyan shilling exchange rate for the day, and after a considerable amount of haggling, we would agree on a rate, and I would leave £100 worth of Kenyan shillings.
The weekly withdrawal of living funds from my UK account, small number of transactions, only known and trusted people having access to my bank details, and an immediate written record & receipt meant that my risk of fraud on the account were low, a priority in a country where there is a considerable amount of credit card fraud. As I had a consistent exchange rate for the weekly withdrawal, my living expenses could be tracked accurately in the local currency, and I had only relatively small amounts of money on hand at any one time.
Cashing cheques (or checks, depending on where you are reading this!) is not as strange as it sounds, especially when in developing nations where bank accounts are expensive, ATM’s are less secure, and local cost of living is lower, so less money is needed.It has the advantage of only allowing very limited access to your account details, and only in writing (i.e. the cheque); of building a relationship with a branch that will often give you preferential rates (often beating those of the banks, especially with less desirable currencies) and of taking place in a more private location with security provided.
If you are going to use this method, make a point of taking some simple precautions.
- Don’t make transactions at the same time every day / week.
- Use a trustworthy Forex Bureau (other expats or your embassy will happily give recommendations, or ask in the forex themselves for references that you can follow up on).
- Make sure your money is stowed out of sight before you leave the branch, preferably in more than one location.
ATM using an international debit card.
Getting access to funds in your existing bank accounts has become more and more simple with credit card issuers cashing in on the increasing popularity of world travel. Visa is currently the global leader in this field, so if you have a visa debit card as part of your home location banking arrangements. you should not find it too difficult to get hold of your money, providing that you;
- a) notify the bank of your travel plans
- b) don’t exceeds your daily cash limit
- c) have other funds available if the ATM retains your card
- d) are vigilant about ATM tampering
On the surface, this seems like the most convenient way to withdraw money, a myth the banks are keen to perpetuate, once you have used this approach a few times, you realize it is virtually impossible to keep track of both your local and home spending. The reasons for this are multiple, and not limited to the banking world’s ever changing rules and charges.
Firstly, there are usually charges levied at both ends of the transaction, meaning that for each withdrawal, you have often paid a significant percentage of the money you withdrew for the privilege of putting it in your wallet. Banks typically charge an international transaction fee of between $3 and $5 per transaction AT EACH END, so it’s worth taking out the maximum allowed and cutting down on the number of transactions.
Secondly, exchange rates for the money you are withdrawing are not displayed at the time you make the transaction, and are typically poor, so you get stung both ways. Establishing exactly how much you are paying for items, especially small transactions such as coffees and snacks, becomes nearly impossible.
Thirdly, you are usually limited to the amount of money that you can take out, and it is rarely enough to cover living expenses for the week, so you are committed to a larger number of transactions (and, of course, fees) over the course of the month. This makes it more difficult not only to keep track of your own financial activity, but also to spot fraudulent transactions. You are also exposing yourself to the risk of theft , especially if you are using the same ATM as part of a regular routine.
And finally, in a link to the previous point, with rising levels of card fraud, banking computer systems are now set up to pick up on ‘unusual’ levels of activity, especially in foreign countries, and will cancel the active status of a card after a certain number of transactions or a certain period of time – defined as ‘unusual activity’. The indicators for this include the use of the card beyond the date that you gave them for travel (most banks have a time limit that you can use it for before you need to refresh the international use capacity – for my bank it’s three weeks, but these timeframes vary) or a high number of transactions, whichever comes sooner. And bearing in mind that setting up a home requires a considerable amount of financial activity, you will almost certainly be in the ‘call for authorization’ situation at least once. This hold can be reversed by contacting the bank and verifying the activity, but making calls to an automated banking system falls into the third ring of Hell category at the best of times – doing it at international rate, from a different time zone and with often poor telephone reception makes it horrific. And having your card publicly declined gets embarrassing, very quickly.
Funds Transfer between your home bank and a local bank.
The advent of internet banking and wire transfers in a global market mean that this is easier than ever to do – most banks offer this service, and it means you keep your preferred home bank, with an established credit history and all your associated payments etc in place, and transfer funds as required. (There are also many online currency exchange options, but those require a little more time and expertise, so for now, we’ll just concentrate on the basics.) The bad news is that banks inevitably levy a charge for this, which can vary widely between banks, and the intermediary bank who handles the exchange also potentially takes a fee. And to cap it off, some banks also takes a fee to receive the funds, despite the fact that it is in the correct currency. No, I can’t explain it either, but Bank of America is one of them, so don’t assume it’s the small, local banks that are the culprits. This is where shopping around for your host bank is vital – you can save yourself a significant amount in fees just by choosing one that has no ‘funds acceptance charge’ – often the credit unions are far more desirable than the banks, not least because they mostly don’t charge to receive money, their charges as a whole are a great deal fairer, and, as they tend have a more personal approach, they are often a little more flexible when regular payments are delayed because of international bank holidays or time differences. However, the host bank option is not always available, depending on your circumstances. Post 9/11, banks are requiring significant proof of identity to open accounts, which may rule a portion of the relocation crowd out, at least until they have the required documentation. The banking community is also required to report deposits of more than $10,000 as part of the anti-terrorism effort, so depending on the amounts that you are transferring, your account may come under scrutiny. For details on host country accounts, keep reading.
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